Legal Articles

Ideas Fuel Industries

Fresh From the Bench: Precedential Patent Cases From the Federal Circuit

September 12, 2016

Overview

Asia Vital v. Asetek – The Circuit reverses the dismissal of a declaratory judgment action even though the accused product had not yet been sold by the plaintiff AVC. According to the decision, although the Supreme Court’s 2007 MedImmune decision relaxed the test for jurisdiction, it did not change the rule that a case or ‎controversy must be based on a real and immediate injury or threat of future injury that is caused by the ‎defendants. In several post-MedImmune decisions, the Circuit held that jurisdiction generally will not arise merely on the ‎basis that a party learns of the existence of a patent owned by another or even perceives such a patent ‎to pose a risk of infringement, without some affirmative act by the patentee. Instead, the Circuit requires ‎conduct that can be reasonably inferred as demonstrating intent to enforce a patent. ‎

In an initial letter, Asetek incorrectly accused AVC of manufacturing the Liqmax 120s. However, it was ‎a demand letter that referenced a product that is similar to Asetek’s K7 and K9 products. ‎AVC then contacted Asetek, saying that it did not manufacture the Liqmax 120s. ‎Instead of simply responding that it had made a mistake with respect to the Liqmax 120s, Asetek responded with a number of statements that indicate that an actual controversy between ‎the parties existed. For example, Asetek (1) rehashed the volatile relationship between the parties; (2) stated that it ‎would not license the patents to AVC due ‎to the previous conflicts between the parties; (3) accused AVC of likely selling other infringing products; and (4) warned AVC that it enforced its IP and noted its pending litigations against ‎other infringers that sell products similar to the K7 and K9. According to the panel, such a response demonstrates ‎intent to enforce a patent, and is thus sufficient to find a substantial controversy between the ‎parties.‎

The panel holds that further interactions between the parties confirm its conclusion. For example, Asetek made threats to its ‎customers regarding AVC’s infringement of the asserted patents, telling customers that AVC has infringed Asetek’s patents, and that if these customers used AVC’s products, a lawsuit would follow.

Asetek relies heavily on the fact that it never referenced AVC’s particular products as ‎potentially infringing, and, in fact, did not even know of AVC’s products at the time of the complaint. But ‎the panel notes that the question of jurisdiction does not turn on ‎Asetek’s knowledge of the specific AVC products or whether Asetek specifically alleged that those products infringed; instead, the question is whether ‎Asetek’s actions can be inferred as demonstrating intent to enforce a patent. The panel concludes ‎that Asetek’s conduct demonstrates just that even though AVC had not yet introduced the accused product.‎

UCB v Yeda–This decision case reaffirms the long-standing rule that prosecution history estoppel prevents a patent owner from recovering claim scope that was given up during prosecution. The Circuit affirms the ruling that UCB's Cimzia® antibody used to treat Crohn's disease and arthritis does not infringe Yeda’s ’923 patent. Yeda had argued the ’923 patent claims to a monoclonal antibody that binds a defined human cytotoxin included chimeric or humanized antibodies even though the patent specification described only murine (mouse) monoclonal antibodies. Yeda further argued that since chimeric monoclonal antibodies were known at the time that the ’923 priority application was filed in 1984, the claims should be construed to cover such chimeric antibodies, as well as humanized antibodies. The Circuit affirms the finding that Yeda’s patent cannot cover chimeric and humanized antibodies because the prosecution history shows Yeda attempted to cover such subject matter during patent prosecution, but then withdrew the claims so the patent could proceed to allowance.

Asia Vital Components (“AVC”) filed a declaratory judgment action against Asetek seeking a declaration that AVC did not infringe its ’362 and ’764 patents and that those patents are invalid. The Eastern District of Virginia dismissed the case for lack of subject matter jurisdiction, concluding that AVC’s complaint did not plead sufficient facts to show that there is a substantial controversy between the parties. For the reasons stated below, we reverse the district court’s ruling and remand for further proceedings.

Background

AVC is a Taiwanese corporation that manufactures cooling systems for integrated circuits. Asetek is the assignee of the ’362 and ’764 patents, which are generally directed toward liquid cooling systems that are used in connection with computers to cool integrated circuits.

On September 30, 2014, AVC filed a complaint against Asetek alleging that AVC had designed and built liquid cooling products, identified as the K7 and K9 products, and seeking a declaration that its products did not infringe the ’362 and ’764 patents and that those patents are invalid. AVC contends that it had completed prototype products of the K7 and K9 products and that those products have a number of similarities to the CoolIT and Cooler Master products that Asetek did accuse of infringement. Asetek responds that it never accused the K7 or K9 products of infringement, and, in fact, contends it did not even know that those products existed before AVC’s complaint.

The district court agreed with Asetek and dismissed the complaint for lack of subject matter jurisdiction. The court did not explain its reasons in the written decision, but instead referred to the reasons stated during a hearing the court held on the question of jurisdiction. At the hearing, the court emphasized that there was never any discussion between the parties as to whether AVC’s products were infringing and credited Asetek’s declarations that it was unaware of the existence of those products.

Discussion

The burden is on the party claiming declaratory judgment jurisdiction to establish that such jurisdiction existed at the time the claim for declaratory relief was filed. The Declaratory Judgment Act provides that “in a case of actual controversy within its jurisdiction, any court of the U.S., upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration.” 28 U.S.C. § 2201(a). In MedImmune, Inc. v. Genentech, Inc., the Court stated that the test for whether an “actual controversy” exists is “whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” 549 U.S. 118 (2007).

Although it relaxed the test for jurisdiction, MedImmune did not change the bedrock rule that a case or controversy must be based on a real and immediate injury or threat of future injury that is caused by the defendants—an objective standard that cannot be met by a purely subjective or speculative fear of future harm. Thus, we have explained post-MedImmune that jurisdiction generally will not arise merely on the basis that a party learns of the existence of a patent owned by another or even perceives such a patent to pose a risk of infringement, without some affirmative act by the patentee. Instead, we have required conduct that can be reasonably inferred as demonstrating intent to enforce a patent.

Here, AVC alleges that a substantial controversy of sufficient immediacy and reality exists between it and Asetek to warrant jurisdiction. It contends that the district court improperly focused on Asetek’s contention that it did not specifically accuse AVC’s K7 and K9 products of infringement in finding no jurisdiction. Asetek responds that, at most, AVC’s allegations amount to “a purely subjective apprehension of a future infringement suit involving the K7 and K9 prototypes” and thus are insufficient to satisfy the actual controversy test.

We agree with AVC that the totality of circumstances indicates that an actual controversy existed between the parties at the time of the declaratory judgment complaint. Although the April 30, 2014 letter incorrectly accused AVC of manufacturing the Liqmax 120s, it was still a demand letter that referenced a product that AVC contends is similar to its own K7 and K9 products. Upon receiving the letter, AVC contacted Asetek, saying that it did not manufacture the Liqmax 120s, and then, in a follow-up email, AVC requested a meeting with Asetek “to discuss the related matter.” Instead of simply responding that it had made a mistake with respect to the Liqmax 120s, Asetek’s August 2, 2014 email contained a number of statements that indicate that an actual controversy between the parties existed. For example, Asetek (1) rehashed the volatile relationship between the parties, saying that poor experiences with AVC in the past have “sown distrust in Asetek for AVC”; (2) stated that it “does not license its patents” generally and, more specifically, that it would not license them to AVC due to the previous conflicts between the parties; (3) accused AVC of “likely selling other infringing products in the United States”; (4) warned AVC that it “enforced its IP” and noted its “pending litigations against CoolIT and Cooler Master”— companies that AVC alleges sell products similar to the K7 and K9; and (5) emphasized that it has been allowed a patent in the European Union with claims similar to the asserted patents and also has similar claims pending in China. Such a response by Asetek clearly demonstrates intent to enforce a patent, and is thus sufficient to conclude that a substantial controversy between the parties existed at the time of the complaint.

The further interactions between the parties only confirm our conclusion. Despite recognizing that AVC does not manufacture the Liqmax 120s, Asetek still agreed to a meeting with AVC where they discussed potential licensing of the asserted patents. Moreover, AVC alleges that Asetek made threats to its customers regarding AVC’s infringement of the asserted patents. Specifically, AVC alleges that “AVC’s customers for the K7 and K9 products have expressed concern that they will be subject to liability under the Asserted Patents and AVC has withheld accepting purchase order out of fear of possible liability based upon the Asserted Patents.” To support its allegation, AVC submitted a declaration from its Chief Corporation Officer, David Wang, stating:

From discussions with representatives of two AVC customers, these representatives informed AVC that Asetek has expressed to them that AVC has infringed Asetek’s U.S. Patents, and that if these customers use AVC’s products, then lawsuit will follow. These customers are: Thermaltake (a Taiwanese company) and IBuyPower (a U.S. company).

Such threats constitute affirmative actions by Asetek to impede and frustrate AVC’s attempts to meaningfully participate in the liquid cooling market and further support our conclusion that a substantial controversy existed between the parties.

Asetek relies heavily on the fact that it never referenced AVC’s particular products or product line as potentially infringing, and, in fact, did not even know of AVC’s products at the time of the complaint. But we have not required such specific facts to find jurisdiction. The question of jurisdiction does not turn on Asetek’s knowledge of the specific AVC products or whether Asetek specifically alleged that the K7 and K9 products infringed the asserted patents; instead, the question is whether, under all the circumstances, Asetek’s actions can be reasonably inferred as demonstrating intent to enforce a patent. We conclude that Asetek’s conduct demonstrates just that.

In addition to an affirmative act by Asetek, AVC must also show that the threat of suit is real and immediate to establish jurisdiction. MedImmune. Although a party need not have engaged in the actual manufacture or sale of a potentially infringing product to obtain a declaratory judgment of non-infringement, there must be a showing of meaningful preparation for making or using that product. Here, AVC has made the requisite showing. AVC alleged that (1) it has completed designs of the K7 and K9 products; (2) it has manufactured sample prototype products of the K7 and K9 (as confirmed by photographs of the products presented to the district court below); (3) it intends to market and sell the products in the United States; and (4) its K7 and K9 products “are positioned to directly compete in the market against Cooler Master, CoolIt Systems and Enermax as well as the Asetek’s products.” AVC’s allegation regarding the concerns of its customers and that it has withheld accepting purchase orders indicates that AVC has customers lined up for its products that have submitted, or, at the very least, are prepared to submit purchase orders for the products.

Asetek does not dispute these allegations but instead contends that they do not demonstrate concrete plans to engage in potentially infringing activities. We disagree. Thus, we conclude that AVC alleged sufficient facts that, “under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” MedImmune.

In this declaratory judgment action, UCB sued Yeda in the Eastern District of Virginia, requesting a declaration that UCB’s Cimzia® antibody does not infringe Yeda’s ’923 patent and that the patent is invalid. Yeda counterclaimed for infringement. The district court granted summary judgment of non-infringement, holding that, based on the specification and prosecution history, the monoclonal antibodies claimed in the ’923 patent are not infringed by the chimeric or humanized antibodies of the Cimzia® product. We affirm the district court’s judgment.

The issue on summary judgment was presented as a question of claim construction. Claim construction is a matter of law, based on underlying facts. Summary judgment may be appropriate when there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.

The district court construed monoclonal antibody as used in the ’923 patent specification and claims to mean a homogenous population of a single type of antibody produced via hybridoma and not including chimeric or humanized antibodies. We agree that the prosecution history requires this construction, for the scope now sought by Yeda was requested of the Examiner, and refused on the ground of new matter. Yeda argues that present claim 1 was never rejected on this ground; Yeda states that only the specific species claims were deemed by the Examiner to contain new matter.

The district court held that all the claims, correctly construed, exclude chimeric or humanized antibodies, the court stating that examination of the prosecution history reveals that for the first ten years of prosecution, neither Yeda nor the examiner understood the term “monoclonal antibodies” to include chimeric or humanized antibodies. Like the evidence in the specification, the prosecution history weighs towards a construction of monoclonal antibodies which does not include chimeric or humanized antibodies. On this ground, the court found non-infringement.

Yeda argues that the court erred in construing the claims to find non-infringement, instead of construing the claims objectively. Yeda states that the claims should not be construed with the goal of including or excluding the accused product. Yeda points out that claim 1 does not mention any particular monoclonal antibody or species of chimera, and should not be limited to the examples in the specification. Yeda states that every embodiment need not be specifically described and claimed to be within the scope of a generic term in a claim.

Yeda Is Correct that Generic Claim Terms Are Construed in Light of What Is Known, But the Specification and Prosecution Must Also Be Considered

During prosecution, Yeda submitted new claims specific to rat, hamster and human antibodies and chimeras thereof as well as claims specifically encompassing chimeras of mouse monoclonal antibodies and non-murine monoclonal antibodies. Yeda argued that its invention is not limited to murine antibodies to human cytotoxin, and should encompass chimeric monoclonal antibodies produced by a genetically engineered cell line. The examiner rejected the proposed claims on the ground of new matter not supported in the specification. Yeda then withdrew the proposed specific claims, and the application was passed to issuance. The district court held that Yeda cannot now obtain a claim construction that recovers claim scope that was yielded in order to obtain issuance of the patent, and construed the claims as excluding chimeric and humanized antibodies.

Yeda argues that this construction is incorrect at least as to claim 1, which recites “monoclonal antibody” but does not specify any specific form or source of antibody. Yeda states that chimeric or humanized monoclonal antibodies were known at the time its priority application was filed, December 20, 1984, and thus should be included in the monoclonal antibodies of claim 1. Yeda presented a publication of Morrison dated November 1, 1984, that describes chimeric antibodies, and cited a December 8, 1984, Nobel Prize speech by César Milstein referring to chimeric antibodies. The court responded to these arguments, holding that, at best, these references establish that scientists knew of chimeric antibodies in November 1984. Establishing that chimeric antibodies existed in 1984, however, is different from establishing that a person of ordinary skill in the art would have understood chimeric antibodies to be monoclonal antibodies in 1984.

The district court concluded that the extrinsic evidence relied upon by Yeda’s experts does not support the conclusion that the understanding of “monoclonal antibodies” in 1984 included either chimeric or humanized antibodies. The court found that for the first ten years of prosecution, neither Yeda nor the examiner understood the term “monoclonal antibodies” to include chimeric or humanized antibodies. The court held that Yeda’s unsuccessful attempt to claim chimeras in the pending application, with acquiescence in the examiner’s rejection on the ground of new matter not supported by the specification, prohibited now obtaining a claim construction that chimeric antibodies, or equivalents thereof, are described in the specification and included in the claims.

Yeda argues that absent a narrowing amendment to the proposed claim that is now claim 1, there can be no prosecution estoppel to the scope of claim 1, merely because some proposed different claims were rejected by the examiner and then dropped by the applicant. That is not a correct general principle. Although each claim in a patent warrants independent consideration in light of its particular facts and history, the general rule is that a patent applicant cannot later obtain scope that was requested during prosecution, rejected by the Examiner, and then withdrawn by the applicant. Such estoppel was reasonably applied to claim 1 by the district court, although claim 1 had not been amended.

We conclude that the district court correctly applied the law, and we affirm the holding that Yeda is estopped from including chimeric and humanized antibodies within the scope of the monoclonal antibodies claimed in the ’923 patent.